Labour productivity growth higher than the overall economy
The hospitality industry’s contribution to the UK economy has grown faster than any other sector since the economic downturn in 2008 and new research predicts that over 500,000 new jobs could be created in hospitality in the next five years. Labour productivity in the sector has also grown at more than double the growth rate of the overall economy. The data comes from two new reports from the British Hospitality Association (BHA), the UK’s leading hospitality and tourism trade body.
The research, by Ignite Economics, also confirms hospitality and tourism as the UK’s fourth largest industry, employing 4.6 million directly and indirectly. Last year it provided £161bn to the total economy, £15bn in exports and £38bn in direct tax receipts. Around 17 per cent, nearly one in five, of all jobs in the UK is now related to the hospitality and tourism sector. The jobs are spread around the country with hospitality ranking as a top six employer in every region of the UK.
The standard industrial classification of “Accommodation and Food Service Activiteis” accounted for 2.3m jobs in 2016, with the wider hospitality industry accounting for over 3.2m jobs, making it the fourth largest sector in terms of UK employment. When looking at the indirect and induced impact on the wider economy, the contribution rises to almost 6m jobs.
Despite many media reports of a ‘Brexit boom’ in tourism following last years’ referendum result and the fall in the value of the pound, 2016 tourism figures in the report give little evidence fror this. 2016 inbound travel grew 3.4%, with 1.2 million more people visiting the UK than in 2015, but there was actually a small decline in inbound holiday passengers in 2016. More recent figures give a brighter picture however. Year to date, the analysis from the BHA Travel Monitor shows that the total number of visitors to the UK is up 10.5% so far in 2017, although business visitors are down -4.4% year on year.
Ufi Ibrahim, the chief executive of the BHA: “The two reports, into productivity and economic contribution, show the colossal value of hospitality and tourism to the economy and the wellbeing of the country, but points out that the growth outlook is highly uncertain, given the pressures of falling real living standards, the costs of implementing the National Living Wage, increases in business rates and the potential lack of labour following exit from the EU.
“We need the Government to step up and support our industry by reducing tourism VAT, working with us to reduce the dependence on EU workers and increase the number of UK workers joining the hospitality industry, allowing the Low Pay Commission to set the National Living Wage and to bring forward a fundamental review of Business Rates.
“We are the front door to the UK and are fundamental to ensuring the UK remains open for business. With the right strategic support from government, economic stability and access to labour we believe that hospitality and tourism can continue to grow and become a career of choice for more and more people.”
Ed Birkin, founder of Ignite Economics, said: “Labour-intensive industries appear to be out of vogue with the current Government but they provide a key role in job creation, preventing significant socio-economic issues associated with high levels of unemployment. In the current climate of economic uncertainty, it is more important than ever to promote industries with strong economic fundamentals.
“The hospitality sector has returned the highest levels of GVA growth and labour productivity improvements of any industry since the economic downturn, combined with a significantly improved use of capital at a time when the overall capital efficiency of the economy has deteriorated. However, there are a number of potential headwinds facing the sector, and the extent of these will determine whether the industry can continue to be a key driver of growth for the UK economy.”
According to the BHA, the 20% VAT rate on tourism (the same as for other goods and services) is twice the average rate across Europe, where many countries grant a lower VAT rate for tourism. While the latest BHA reports give a figure for jobs the tourism and hospitality industries could potentially create, they also highlight the need to source that labour. A report released in March this year says that three-quarters of waitstaff, a quarter of chefs and 37 percent of housekeeping staff working in Britain are from elsewhere in the EU. Almost one-quarter of the overall hospitality workforce is from other EU countries, and the KPMG study for the BHA says that “The labor shortfall 10 years after Brexit would be 1 million if EU migration fell to zero from 2019.”
As well as current uncertainty about the rights of EU citizens following Brexit, the fall in the value of the pound against the euro has already made the UK a less attractive place to work for other Europeans. But many hospitality businesses find it almost impossible to recruit British staff – the Guardian reported in March that at catering chain Pret a Manger only 1 in 50 job applicants are British. KPMG estimates that the hospitality sector currently requires 62,000 EU migrants per annum to be able to maintain current activities and to grow.
View The Economic Contribution of the UK Hospitality Industry report and the UK Hospitality Productivity report.